The unknown ability of companies and countries to replace declining crude production from large, older fields.

Changing relationships between international oil companies and national oil companies.

Global development and uptake of alternative energy-delivery sources, including LNG and GTL.

The possibility of legislated restrictions on carbon emissions and the emergence of a worldwide carbon-credits trading system.

An overarching issue for the international oil industry involves access to promising exploration areas at realistic terms.

“The environment is very tough from an explorationist’s point of view,” said Edward Chow , senior fellow for the Center for Strategic and International Studies in Washington, D.C.

Right now, the world is seeing “a complete mismatch of expectations” between oil companies willing to invest in exploration and countries wanting to set terms based on $70-$80 a barrel oil, he said.

“At a minimum, governments are able to drive much harder bargains now,” Chow observed.

“Access is clearly a problem for companies wanting to explore,” he added. “The most prospective areas have been explored and now you’re moving into more difficult areas.”

Quiet Interest

In addition, many other trends and issues could influence the international oil and gas picture, including:

Industry activity in West and East Africa and in northern and southern Iraq.

Addition of unconventional supplies to worldwide liquids production.

Exploration for and production of natural gas in the Middle East.

Acquisition and development of second-tier heavy oil deposits.

Changes in the world’s economic outlook.

Africa has drawn increasing interest from the international exploration community, according to AAPG member Bob Fryklund , vice president of industry relations for IHS Inc. in Houston.

“East Africa is really the thing people are looking hard at right now,” Fryklund said.

“There is still a little bit of the West Africa component, but it’s moving out of the Golden Triangle,” he said. “The biggest thing on the West Africa side will be pushing that Cretaceous play further north, into Ghana.”

While the industry has already found Golden Triangle riches offshore West Africa, it’s “still searching for the gold mine” in East Africa, Fryklund observed.

“The Iraq story is a two-fold one. The supermajors are looking at the supergiant fields and development in the south. The independents are looking at the north. That’s an exploration play,” he said.

New exploration interest targets in the Kurdistan Region of northern Iraq, Fryklund noted. He cited recent results from the region’s Taq Taq oilfield, which could hold more than two billion barrels of oil.

Independents from around the world are showing a very interested “and mostly very quiet” approach to exploration in Iraq.

“Because of the political situation, a lot of people aren’t advertising what they’re doing there,” Fryklund said.

Unconventionals’ Role

In its current International Energy Outlook, the U.S. Energy Information Agency (EIA) projects world liquids production to increase by 14 million barrels per day up to the year 2015.

It then forecasts a liquids production increase of an additional 20 million barrels per day from 2015 to 2030.

No nod to the concept of Peak Oil there, as the EIA sees unconventional resources adding a significant boost to the world’s oil supply.

“We do have a lot of unconventionals coming in. By 2030, we have them accounting for 9 percent of the total liquids supply,” said Linda Doman, senior international energy analyst for the EIA in Washington.

“Clearly, the oil markets are critically important,” she added. “How fast will unconventionals come online? How much can OPEC continue to manage the supply side?”

Price also drives production, and the current EIA outlook takes into account higher oil prices in recent years for each of its three forecast scenarios.

“Our low price scenario is significantly higher than it has been earlier,” Doman said. “If you pick up an outlook from 2004 or even 2005, you’ll see that the low price scenario was less than $20 (per barrel).”

It’s the Gas, Gas, Gas

A surge of exploration has begun in the Middle East, but it’s because of natural gas and not oil, said AAPG member Stuart Lewis , IHS director-Middle East in Tetbury, England.

“The return to gas exploration in the Middle East is a big story. The whole issue of gas is affecting everything,” Lewis said.

“You have a number of gas-rich and gas-poor countries, some of which happen to be major oil producers,” he added. “Really, it’s a return to exploration after many years for some countries.”

In part, this interest in gas production comes from the possibility of converting gas to LNG for export. Lewis noted Qatar’s goal of increasing LNG production to 77 million tons per year.

It also reflects a desire to use gas for domestic energy needs while maximizing the amount of oil available for export.

“If you look at the figures for the liquids that are consumed in the OPEC countries, the preference is to use the gas and monetize the liquids,” Lewis said.

“Pricing will be key, because from a historical perspective there’s never been a market for gas” in the region, he added.

Fryklund said the industry has started eyeing heavy-oil accumulations in Colombia, Peru and other Latin American countries outside Venezuela.

“Companies are continuing to position themselves there just as they have in Venezuela and Canada,” he said.

Other tar sands accumulations in Madagascar and the Volga-Ural basin also are attracting attention, he said.

Most of these second-tier, heavy-oil/tar prospects fall in the range of five billion to 10 billion barrels in place with a projected recovery rate of 10 percent, according to Fryklund.

‘Most Reasonable Track’

The chance of gaining 500 million to one billion barrels of production from a prospect can’t be overlooked by the industry, he said.

The EIA’s reference case for its international outlook represents the “most reasonable track” going forward, Doman said. As such, it’s essentially a status-quo projection to 2030.

“In a general sense we think there will be efficiency gains during this period but we don’t predict any specific breakthroughs in our forecast,” Doman acknowledged.

“We’re not projecting wars,” she said. “We’re not predicting weather disasters. We’re not even looking at some great technology coming in.”

The biggest unknown that could make a major difference to the oil and gas industry, she said, is a shift in the world economy.

A world recession could sink oil prices, and even a broad slowdown might change energy markets significantly.

“What happens with China is huge,” Doman said.

“To think that the tremendous growth we’re seeing there today will continue for 30 years is difficult,” she added.

Chow also singled out economic change as a potential issue for the global petroleum business.

“I don’t have any reason to believe that the oil-price cycle has been repealed in any fundamental way,” Chow said.

“The question is whether there’s going to be a game-changer somewhere down the road,” he added. “That’s hard to see right now.”

For Chow, a game-changer would be a trend big enough to alter the current direction of the industry, like the price of oil falling to $50 a barrel or less.

“If we have a recession in the U.S., I can easily see $50 a barrel oil. It’s not like the world is running out of oil,” Chow observed.